the Portland Oregonian
analyzes the Grange Bill*
HORSE
“WILL OREGON INVITE
REPUDIATION?
J
‘It
would be difficult to exaggerate the
ft
SENSE
SERIES
N O .9
“ Parts of any one district do not need to be
contiguous— they do not need to be in the same
county; they can be as far apart as the state
boundaries permit; they can include one or more
cities, or they can be exclusive of cities.
menace to Oregon's prosperity and gen­
eral w elfare that resides in the proposed
“ It is an open invitation for gerry­
constitutional amendment for ‘people's
mandering, and it would be seized upon
water and pow er utility districts.* It is the
by professional promoters who would
one measure on the ballot for the Novem­
hope to profit through unsound develop­
ber election that leaves the gate wide
ment schemes and the sale of securities.
open. It would provide entry for every
hare-brained scheme that might be de­
vised in the field of water and power de­
velopment.
A ll that would be required
would be prom oters sufficiently plausible
and energetic to ‘sell' their schemes.
“ The greatest evil in this pending amendment
— and there are many— lies in the fact that it
wipes out all limitations on taxation and the sc.Ie
of obligations. The state has built up a structure
for taxation that is carefully guarded to protect
against extravagance which might lead to finan­
cial disaster. The constitution places a 6 per cent
limitation on the state. The extent to which cities
may create indebtedness is definitely fixed. There
are hard and fast limitations on the taxing and
debt-incurring powers of school districts, ports,
irrigation and drainage districts— on every unit
within the state that has such authority.
“ But, h ere com es a measure that
ignores all precautions and bluntly au­
thorizes the districts to be created under
it, among other things:
“ This step would court disaster and
repudiation. It comes at a time when
erty o f such districts.
*To issue, sell and assume evidences of
indebtedness.'
“ Neither the 6 per cent limitation nor any
other restriction would apply to these districts
because they would be sef up on the authority o
the constitution, and the legislature, in parsing an
enabling act, could not provide conditions tha
would narrow the power? granted in the am.n
ment. That is the strongly prevailing le?» ° ° ,n
ion. Attorneys for the proponents have
unable to ahow restriction, in other parts of the
t e
“ But there was a day of reckoning and it ranks
among the major catastrophies in the history of
the nation. Between 1830 and 1842, in this orgy
of public expenditure, the debt of the states in­
creased from $13,000.000 to $213,000,000, and
suddenly they found that they could not pay.
State after state was unable to meet its obli­
gations. Pennsylvania, Maryland, Mississippi,
Michigan, Florida, Indiana and Illinois were on
the verge of bankruptcy. All of them suspended
payment of interest. All of them were put to dire
extremes to weather the storm and three, Mis­
sissippi, Michigan and Florida, repudiated cap­
ital debt. The heavy indebtedness of many south­
ern states hung over until after the civil war.
More repudiation followed and in 1880 those
southern states which had refused to pay were
joined by a northern state, Minnesota, which
settled its railroad bonds at 50 cents on the
dollar.
“ Nor has repudiation been confined to the
early era of construction nor to the states. Numer­
ous cities, towns and counties defaulted on their
obligations following the panic of 1873 and the
courts of the land were clogged with resulting
litigation.
there is hysteria on the subject of power
“ The effect of repudiation then, and
development, inspired for political pur­
always, has been to impair or ruin credit,
poses. Those who think more clearly, yet
to stifle growth and progress.
believe in public ownership of utilities,
are against this visionary and loosely
*To levy taxes upon the taxable prop­
constitution that would be applicable.
“ The argument has been advanced that the
people of the districts would be able to protect
themselves by setting their own limitations on
financing and investment. But would they do
so? It has not been the experience elsewhere
that they would. Irrigation districts now are up
to the neck in trouble because the guess was
wrong on the burdens that they could carry. The
state, which guaranteed the interest for five
years, under a provision that it is now proposed
to revoke, is out more than $4,000,000 on that
experiment, much, perhaps all, of which will
never be returned but must be passed on to the
general taxpayers. If the property owners of
these sprawling, disconnected and overlapping
districts could be depended upon to protect
themselves, why has it been thought necessary
to place taxation limitations on every other tax-
levying agency?
highways and other public works, for all o f which
public credit was staked, with no thought of a
day of settlement. Says a writer in reference to
that era: ‘Private ambition and public spirit were
skillfully played upon to induce voters to ratify
with eagerness what doubtless seemed to many
a public duty as well as a private gain.’
drawn amendment.
“ But the time is ripe for schemers to rush these
districts, if they are created, into difficulties from
which they could never extricate themselves and
which would injure, if it did not undermine, the
credit of Oregon and of its subdivisions.
“ It was unrestrained enthusiasm for develop­
ment and overconfidence in ability to pay that
first brought repudiation into our financial vocab­
ulary. That was a great many years ago, in the
early days of the republic, but the experience has
its lesson for us in this year 1930. The country
was rich in resources, but their development was
retarded by lack of transportation. Then came a
tidal wave of sentiment for the laying of rail­
roads and the digging of canals, the building of
amendment is approved the lid is off.
*
--A -?
¡/■A '
Reprinted verbatim from the editorial
e 0f Th«. Oregonian, issue of September 26, 1930.
Pacific Northwest Public Service Co. “Pepco”
“ The lesson of these experiences and the in­
creased wealth of the country have confined
repudiation to isolated cases in later years.
‘Another and perhaps more efficient safeguard
against its recurrence,’ says a historian, ‘is to be
found in the innumerable restrictions against the
debt-making power of the states which have
found their way into recent state constitutions.'
“ The lesson is plain, yet here in our
own state it is proposed to ignore it by
departing in our constitution from this
established policy. Surely the voters of
Oregon will have more regard than that
for their future welfare and the good
name and financial standing of their
state. t»
___ _ i